Ready-mixed concrete producers were generally able to turn higher selling prices into greater profitability. The survey reported an increase from $6.14 in 2005 to $7.63 last year, or another $1.49 per-yard improvement (Figure 4). Compared to 2004, when profitability was $2.98, this represents an even greater margin expansion of a whopping 256% over the two years. With an 8.7% margin as a percentage of sales in 2006, the industry had never been healthier (Figure 5).

There are two reasons for this margin increase. First, plants were operating at near full capacity during this time. Second, many producers also invested heavily in efficiency improvements, such as truck tracking, batching computers, and other labor-saving initiatives. The 2007 results will be the true indicator of how well these initiatives worked.

Despite the expansion in selling price and profitability, 2006 raw material costs galloped forward, driving all of the price increase. Total raw materials actually outpaced the gains in selling price, rising from $37.86 in 2005 to $49.82 in 2006, or an increase of $11.96 per-yard, which actually exceeded the gains in selling price year-over-year. But the industry expanded profitability during this period by holding the line, or making gains, in fixed and variable costs across myriad categories, resulting in the 2006 record year.

Both the typical producer, defined as the 50th percentile, as well as the bottom quartile, have not been able to close the gap with the top quartile on selling price. The top quartile reported an average selling price of $94.92 for a $4.61, or 5.1%, advantage over the typical producer, the identical percentage advantage the top quartile enjoyed in 2005. The bottom quartile reported a selling price of $83.39, which is $6.92, or 7.66%, lower than the typical producer, and $11.53 and 12.2% lower than the top quartile.

Methodology

Historically, all participants have received a detailed questionnaire each spring. Financial personnel within the participating companies complete the form with the results of their prior year's financial performance. This is submitted to a third-party accounting firm to assure confidentiality.

The data from these questionnaires are compiled and circulated to the participants, all of whom receive a customized report that measures the performance of their companies against their peers throughout the industry. The results are tabulated by region, size of the business, and by the top and bottom quartiles in terms of profitability. The National Ready Mixed Concrete Association's Business Administration Committee presents the results at its annual Fall Conference.

For the 2008 survey, which will measure the industry's performance in 2007, NRMCA will accelerate the timeline for circulating the questionnaires. The goal is to deliver the survey by late spring or early summer of 2008 so the results will be more timely and relevant for the participants.

Also, if participation can be increased sufficiently beyond the current base of respondents, NRMCA may break down regional results even further and report individual states. This will be even more meaningful for participants.